Note 11 – Associate Retirement Plans

The Company’s retirement programs include pension plans providing non-contributory benefits and salary deferral defined contribution plans. Substantially all of the Company’s associates not covered by CBAs are covered by a frozen non-contributory pension plan, a defined contribution plan, or both. Associates covered by CBAs at the Company’s Columbus, Georgia; Norfolk, Virginia; and Landover, Maryland facilities all participate in the Company’s defined contribution plan; the remaining associates covered under CBAs participate in a multi-employer pension plan.

Defined Contribution Plans

Expense for employer matching and profit sharing contributions made to defined contribution plans totaled $7.9 million, $11.9 million and $21.1 million in 2017, 2016 and 2015, respectively.

Executive Compensation Plans

The Company has a deferred compensation plan for a select group of management personnel or highly compensated associates. The plan is unfunded and permits participants to defer receipt of a portion of their base salary, annual bonus, or long-term incentive compensation which would otherwise be paid to them. The deferred amounts, plus earnings, are distributed following the associate’s termination of employment. Earnings are based on the performance of hypothetical investments elected by the participant from a portfolio of investment options.

The Company holds variable universal life insurance policies on certain key associates intended to fund distributions under the deferred compensation plan referenced above. The net cash surrender value of approximately $4.3 million and $4.2 million at December 30, 2017 and December 31, 2016, respectively, is recorded in “Other assets, net” in the consolidated balance sheets. These policies have an aggregate amount of life insurance coverage of approximately $15.0 million.

The Company had two separate trusts established for the protection of cash balances owed to participants in its deferred compensation plans. The Company was required, as specified by the plan documents, to fund these trusts at the time of the merger with 125% of its pre-merger liability to plan participants. These trusts were subsequently terminated in 2015 and the Company received cash proceeds from the liquidation of corporate owned life insurance policies of $5.0 million.

Defined Benefit Plans

The Company sponsors the SpartanNash Company Pension Plan (the “Pension Plan”), a frozen defined benefit pension plan. The pension benefits are primarily based on years of service and compensation, with some differences resulting from the nature of how benefits were calculated under the Company’s legacy defined benefit plans, as described below. On December 31, 2014, the Retirement Plan for Employees of Super Food Services, Inc. (“Super Foods Plan”) was merged into the Spartan Stores, Inc. Cash Balance Pension Plan (“Cash Balance Pension Plan”) and renamed the SpartanNash Company Pension Plan. The merging of the plans resulted in lower administrative fees and reduced cash funding. Annual payments to the pension trust fund are determined in compliance with the Employee Retirement Income Security Act of 1976 (“ERISA”). Plan assets consist principally of U.S. government and corporate obligations and common stocks. The plan does not hold any SpartanNash stock.

The Cash Balance Pension Plan, a non-contributory cash balance pension plan, was frozen effective January 1, 2011. As a result of the freeze, no additional associates were eligible to participate in the plan after January 1, 2011, and additional service credits were no longer added to each participant’s account; however, interest credits continue to accrue. Prior to the plan freeze, the plan benefit formula utilized a cash balance approach whereby credits were added annually to a participant’s account based on compensation and years of vested service, with interest credits also added to the participant’s account at the Company’s discretion.

The Super Foods Plan, a qualified non-contributory pension plan offered by one of the Company’s subsidiaries, provides retirement income for certain eligible full-time associates who are not covered by a union retirement plan. Pension benefits under the plan are based on length of service and compensation, and contributions meet the minimum funding requirements. This plan was frozen effective January 1, 1998.

If lump sum distributions are made in an amount exceeding annual interest cost, settlement accounting is triggered and the resulting settlement expense is recorded as a component of total pension expense (income). Lump sum distributions of $2.6 million and $2.8 million were made and resulting pension settlement charges of $0.5 million and $0.7 million were incurred in 2017 and 2016, respectively.

Postretirement Medical Plans

SpartanNash Company and certain subsidiaries provide healthcare benefits to retired associates under the SpartanNash Company Retiree Medical Plan (the “Retiree Medical Plan”). Former Spartan Stores, Inc. associates hired prior to January 1, 2002 who were not covered by CBAs during their employment and who have at least 10 years of service and have attained age 55 upon retirement qualify as “covered associates.” Covered associates that retired prior to March 31, 1992 receive major medical insurance with deductible and coinsurance provisions until age 65 and Medicare supplemental benefits thereafter. Covered associates retiring after April 1, 1992 are eligible for monthly postretirement healthcare benefits of $5 multiplied by the associate’s years of service. This benefit is in the form of a credit against the monthly insurance premium. The retiree pays the balance of the premium.

The following tables set forth the actuarial present value of benefit obligations, funded status, changes in benefit obligations and plan assets, weighted average assumptions used in actuarial calculations and components of net periodic benefit costs for the Company’s significant pension and postretirement benefit plans, excluding multi-employer plans. The prepaid, current accrued, and noncurrent accrued benefit costs associated with pension and postretirement benefits are reported in “Other assets, net,” “Accrued payroll and benefits,” and “Postretirement benefits,” respectively, in the consolidated balance sheets.

	Pension Plan						Retiree Medical Plan
	December 30,			December 31,			December 30,			December 31,
(In thousands, except percentages)	2017			2016			2017			2016
Funded Status
Projected/Accumulated benefit obligation:
Balance at beginning of year	$	80,350		$	83,398		$	9,663		$	9,179
Service cost		—			—			184			187
Interest cost		2,345			2,977			345			345
Actuarial loss		4,662			1,598			303			213
Benefits paid		(7,204	)		(7,623	)		(296	)		(261	)
Balance at end of year	$	80,153		$	80,350		$	10,199		$	9,663

Fair value of plan assets:
Balance at beginning of year	$	81,982		$	84,753		$	—		$	—
Actual return on plan assets		6,477			4,852			—			—
Company contributions		—			—			296			261
Benefits paid		(7,204	)		(7,623	)		(296	)		(261	)
Balance at end of year	$	81,255		$	81,982		$	—		$	—
Funded (unfunded) status	$	1,102		$	1,632		$	(10,199	)	$	(9,663	)

Components of net amount recognized in consolidated balance sheets:
Noncurrent assets	$	1,102		$	1,632		$	—		$	—
Current liabilities		—			—			(417	)		(412	)
Noncurrent liabilities		—			—			(9,782	)		(9,251	)
Net asset (liability)	$	1,102		$	1,632		$	(10,199	)	$	(9,663	)

Amounts recognized in AOCI:
Net actuarial loss	$	18,205		$	16,938		$	1,678		$	1,434
Prior service credit		—			—			(250	)		(408	)
Accumulated other comprehensive loss	$	18,205		$	16,938		$	1,428		$	1,026

Weighted average assumptions at measurement date:
Discount rate	3.45%			3.82%			3.72%			4.26%
Ultimate health care cost trend rate	N/A			N/A			5.00%			5.00%

	Pension Plan									Retiree Medical Plan
(In thousands, except percentages)	2017			2016			2015			2017			2016			2015
Components of net periodic benefit cost (income):
Service cost	$	—		$	—		$	—		$	184		$	187		$	231
Interest cost		2,345			2,977			3,325			345			345			404
Amortization of prior service cost		—			—			—			(158	)		(158	)		(158	)
Expected return on plan assets		(3,836	)		(4,269	)		(4,923	)		—			—			—
Recognized actuarial net loss		221			706			827			59			42			174
Net periodic benefit (income) expense	$	(1,270	)	$	(586	)	$	(771	)	$	430		$	416		$	651
Settlement expense		548			692			—			—			—			—
Total (income) expense	$	(722	)	$	106		$	(771	)	$	430		$	416		$	651

Weighted average assumptions used to determine net periodic benefit cost (income):
Discount rate	3.82%			4.04%			3.75%			4.26%			4.55%			4.15%
Expected return on plan assets	4.83%			5.05%			5.50%			N/A			N/A			N/A

The net actuarial loss and prior service cost included in AOCI and expected to be recognized in net periodic benefit cost in 2018 are as follows:

				Retiree
(In thousands)	Pension Plan			Medical Plan
Prior service credit	$	N/A		$	(158	)
Net actuarial loss			417		88

Prior service costs (credits) are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses for the Pension Plan are amortized over the average remaining life of all participants when the accumulation of such gains and losses exceeds 10% of the greater of the projected benefit obligation and the market-related value of plan assets.

Assumed healthcare cost trend rates have a significant effect on the amounts reported for the Retiree Medical Plan. Assumed current healthcare cost trend rates used to determine net periodic benefit cost (income) were as follows:

	2017	2016	2015
Pre-65	N/A	7.50%	7.75%
Post-65	8.40%	8.40%	6.85%

The effect of a one-percentage point increase or decrease in assumed healthcare cost trend rates on the total service and interest components and the post-retirement benefit obligations would be less than $0.1 million.

Expected Return on Assets and Investment Strategy

The Company has assumed an average long-term expected return on the Pension Plan assets of 4.84% as of December 30, 2017. The expected return assumption was modeled by third-party investment portfolio managers, based on asset allocations and the expected return and risk components of the various asset classes in the portfolio. Determining projected stock and bond returns and then applying these returns to the target asset allocations of the plan assets developed the expected return. Equity returns were based primarily on historical returns of the S&P 500 Index. Fixed-income projected returns were based primarily on historical returns for the broad U.S. bond market. This overall return assumption is believed to be reasonable over a longer-term period that is consistent with the liabilities.

The Company has an investment policy for the Pension Plan with a long-term asset allocation mix designed to meet the long-term retirement obligations by investing in equity, fixed income and other securities to cover cash flow requirements of the plan and minimize long-term costs. The asset allocation mix is reviewed periodically and, on a regular basis, actual allocations are rebalanced to approximate the prevailing targets. The following table summarizes both the targeted allocation of the Pension Plan’s asset allocation by asset category and actual allocations as of December 30, 2017 and December 31, 2016:

	Target			Actual
	December 30,			December 30,			December 31,
Asset Category	2017			2017			2016
Equity securities		20.0	%		19.3	%		20.8	%
Fixed income		80.0			79.4			76.9
Cash equivalents		—			1.3			2.3
Total		100.0	%		100.0	%		100.0	%

The investment policy emphasizes the following key objectives: (1) provide benefit security to participants by maximizing the return on plan assets at an acceptable risk level, (2) maintain adequate liquidity for current benefit payments, (3) avoid unexpected increases in pension expense, and (4) within the scope of the above objectives, minimize long term funding to the plan.

The fair values of the Pension Plan assets at December 30, 2017 and December 31, 2016, by asset category, are as follows:

	Fair Value of Assets as of December 30, 2017
(In thousands)	Total		Level 1		Level 2		Level 3		NAV (a)
Mutual funds	$	18,194	$	—	$	—	$	—	$	18,194
Pooled funds		48,133		—		—		—		48,133
Money market fund		1,037		—		1,037		—		—
Guaranteed annuity contract		13,891		—		—		13,891		—
Total fair value	$	81,255	$	—	$	1,037	$	13,891	$	66,327

	Fair Value of Assets as of December 31, 2016
(In thousands)	Total		Level 1		Level 2		Level 3		NAV (a)
Mutual funds	$	14,178	$	—	$	—	$	—	$	14,178
Pooled funds		50,506		—		—		—		50,506
Money market fund		1,872		—		1,872		—		—
Guaranteed annuity contract		15,426		—		—		15,426		—
Total fair value	$	81,982	$	—	$	1,872	$	15,426	$	64,684

(a)

Assets are measured at net asset value (“NAV”) (or its equivalent) on a non-active market, and therefore, have not been classified in the fair value hierarchy.

Level 3 assets consist of guaranteed annuity contracts. A reconciliation of the beginning and ending balances for Level 3 assets is as follows:

(In thousands)	December 30, 2017			December 31, 2016
Balance at beginning of year	$	15,426		$	16,198
Purchases, sales, issuances and settlements, net		(2,222	)		(1,733	)
Interest income		552			631
Unrealized gains		135			330
Balance at end of year	$	13,891		$	15,426

See Note 8 for a discussion of the levels of the fair value hierarchy. The above assets’ fair value measurement level is based on the lowest level of any input that is significant to the fair value measurement.

The following is a description of the valuation methods used for the Pension Plan’s assets measured at fair value in the above tables:

Cash & money market funds: The carrying value approximates fair value. Money market funds are valued on a daily basis at NAV using the amortized cost of the securities held in the fund. Since amortized cost does not meet the criteria for an active market, money market funds are classified within Level 2 of the fair value hierarchy of ASC 820.

Mutual Funds: These investments are valued using NAV as a practical expedient to estimate fair value and are not classified in the fair value hierarchy. NAV is determined once a day after the closing of the exchange based upon the underlying assets in the fund, less the fund’s liabilities, expressed on a per-share basis. Mutual funds held by the Pension Plan are open end mutual funds that are registered with the Securities and Exchange Commission (“SEC”). These funds are required to publish their daily NAV and to transact at that price. The mutual funds held by the Pension Plan are therefore deemed to be actively traded.

Pooled Funds: The plan holds units of various Aon Hewitt Group Trust Funds offered through a private placement. The units are valued daily using NAV as a practical expedient to estimate fair value. NAVs are based on the fair value of each fund’s underlying investments, and are not classified in the fair value hierarchy. The practical expedient is not used when it is determined to be probable that the investment will be sold for an amount different than the reported NAV.

Guaranteed Annuity Contracts: The guaranteed annuity contracts are immediate participation contracts held with insurance companies that act as custodian of the Pension Plan’s assets. The guaranteed annuity contracts are stated at contract values, which are determined by the custodians and approximate fair values. The Company evaluates the general financial condition of the custodians as a component of validating whether the calculated contract value is an accurate approximation of fair value. The review of the general financial condition of the custodians is considered obtainable/observable through the review of readily available financial information the custodians are required to file with the SEC. The group annuity contracts are classified within Level 3 of the valuation hierarchy of ASC 820.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuations methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement.

The Company expects to make contributions in 2018 of $0.4 million to the Retiree Medical Plan. Although no contributions are required, the Company expects to contribute approximately $2.0 million to the Pension Plan in 2018.

The following estimated benefit payments are expected to be paid in the following fiscal years:

(In thousands)	2018		2019		2020		2021		2022		2022 to 2026
Pension benefits	$	8,668	$	8,274	$	7,702	$	7,843	$	7,035	$	26,850
Post-retirement medical benefits		417		463		503		540		575		3,232

Multi-Employer Health and Welfare Plans

In addition to the plans described above, the Company participates in the Michigan Conference of Teamsters and Ohio Conference of Teamsters Health and Welfare plans. The Company contributes to these multi-employer plans under the terms contained in existing CBAs and in the amounts set forth within these agreements. The health and welfare plans provide medical, dental, pharmacy, vision, and other ancillary benefits to active associates and retirees, as determined by the trustees of the plan. The Company’s contributions largely benefit active associates, and as such, may not constitute contributions to a postretirement benefit plan. However, the Company is unable to separate contribution amounts for postretirement benefits from contribution amounts paid for active participants in the plan. These plans have a significant surplus of funds held in reserve in excess of claims incurred, and there is no potential withdrawal liability related to the Company’s participation in the plans. With respect to the Company’s participation in these plans, expense is recognized as contributions are funded. The Company contributed $14.1 million, $14.3 million and $15.1 million to these plans in 2017, 2016 and 2015, respectively.

Multi-Employer Pension Plan

The Company also contributes to the Central States Plan, a multi-employer plan defined previously, under the terms of CBAs that cover its union-represented associates and in the amounts set forth within these agreements. The Company is party to four CBAs that require contributions to the Plan with expiration dates ranging from January 2019 to February 2021. These CBAs cover warehouse personnel and drivers in Grand Rapids, Michigan and Bellefontaine and Lima, Ohio. With respect to the Company’s participation in the Central States Plan (EIN 36-60442343 / Pension Plan Number 001), expense is recognized as contributions are funded. The Company contributed $13.4 million, $13.4 million and $12.9 million to this plan in 2017, 2016 and 2015, respectively. The contributions made by the Company represent less than five percent of the Plan’s total contributions in 2017.

The risk of participating in a multi-employer pension plan is different from the risk associated with single-employer plans in the following respects:

Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

If a company chooses to stop participating in a multi-employer plan, makes market exits such as closing a distribution center without opening another one in the same locale, or otherwise has participation in the plan drop below certain levels, the company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The PPA zone status of the Plan, which is based on information the Company received from the Plan and is certified by the Plan’s actuary, is “critical and declining” for the Plan’s two most recent fiscal years ending December 31, 2017 and 2016. Among other factors, plans in the “critical and declining” zone are generally less than 65% funded and projected to become insolvent within the next 15 years (or 20 years depending on the ratio of active-to-inactive participants). A rehabilitation plan has been implemented by the trustees of the Plan, and the CBAs that cover warehouse personnel and drivers in the Bellefontaine and Lima, Ohio distribution centers have permanent surcharges imposed due to the failure to adopt the trustee recommended rehabilitation plan. Refer to Note 9, Commitments and Contingencies, for further information regarding the Company’s participation in the Central States Plan. As of the date the consolidated financial statements were issued, Form 5500 was not available for the plan year ended December 31, 2017.